The Pension Act imposes accuracy-related penalties of 20 percent for an underpayment of tax resulting from a “substantial” valuation misstatement, and 40 percent for a “gross” valuation misstatement. A “substantial” valuation misstatement is a value 150 percent or more of the amount determined to be the correct value, and a “gross” valuation misstatement is a value 200 percent or more of the amount determined to be correct.
The Pension Act also eliminates the reasonable cause exception in the case of any “gross” valuation misstatement. This means that the taxpayer may not rely upon an “I thought I received good professional advice” defense. The Pension Act also streamlined the procedural requirements for the Secretary of the Treasury to impose civil penalties or disciplinary action against an appraiser.
All of this means its up to you to hire a competent, experienced, appraiser because its you who pays the penalties (the appraiser pays penalties too!). Remember, you’ve given up some development rights forever and you could pay an IRS penalty if the appraisal is faulty.
When you file your taxes, both the appraiser and the land trust must sign your IRS 8283 form.